Thursday, March 30, 2006

Freeport - Easy Dark Green Target

Ah what the hell! Freeport has been in the news of late and made into the Blogsphere a few times, invariably as the BBM (Big Bad Multinational)..Yawn. The trouble with those of the "Dark" Green colour is they tend to be little more than socialists covered with a green mould with a deep hate of all business and development.

Ok a few points before I start.

One.. Development is good!! It gives most of us a lifestyle our ancestors could not even imagine; those who are left out of the cycle are victims of poor government not development per se

Two.. I consider myself a bit of green although of a light green colour, I firmly believe with wealth creation comes time which grants us the ability to think of others instead of day to day survival

Three.. I am not about to get into the politics of Papua. Although very serious (people are dying) as far as I am concerned one issue is economic the other political/national.

There is a huge outcry at the moment to shut down the “EVIL” Freeport. Ok, let’s go along with the shutdown plan, let’s shut down Freeport what are the consequences:

For a start that’s US 1.1 billion dollars the Indonesian Government won't get this year assuming things stay the same as last. Of course, Freeport didn't do too bad either scoring about $350 Million for the years work. Mind you if you read the claptrap around at the moment you would swear the ratio was the other way around.

Obviously the share price will collapse along with the 9.36% of the shares held by the Government.

Freeport employment for just under 20,000 employees not including indirect suppliers and contractors, along with the taxes paid into the Indonesian Coffers will disappear.

Now to pose a few questions:

Would the Indonesian government continue to maintain the Hospital and University once the Freeport financial support disappears?

Closure of the mine, would have what effect on the other international investments in Indonesia?

Can Indonesia really afford to close this mine?

Perhaps some people think, Indonesia should go back to pre-investment days (was there ever such a time?)

Freeport or more correctly Freeport McMoran Copper and Gold have been rightly accused of environmental damage which is no great surprise it’s a mine! Just how bad the environmental damage as compared to benefits to Indonesia as whole is subject of much debate. What to do about it in rational manner is the question that must be answered not irrational calls to close the mine.

There is no doubt that Freeport has become a symbol of the tension between the Government in Jakarta and Papuan people seeking a better deal. It has been alleged current "crisis" has the usual "mysterious figures" in the background. How true?

The fact that the local Papuans seem to have got a raw deal with them carrying the cost of the environmental damage with little of no benefit is not disputed. However, that the local people are getting a "raw deal" is the case throughout the provinces with any number of large income producing projects. The question that must be answered is should the company be held responsible for the policies and laws of the Government of the day or ?
A far deeper issue is the whole policy of equitable sharing of resources in an open transparent manner devoid of corruption is the only way to avoid continuing violence. Surely this is Government responsibility not a company one.

Should Freeport (for instance) start pouring money into the local community via various officials when does a gift become a bribe? Should not the central Government be responsible for the distribution of revenue in a fair and equitable manner (not saying it happens that way, but that it should)?

Ok that’s it for now, I fully expect to get ravaged by Greens seeing red (funny how they change colour so quick). I just think Freeport is an easy target without looking beyond the surface at what really needs to be done and don't forget what happens at Freeport is repeated in any number of provinces every day, so why only freeport at the moment?.

In summary, my view:

Mining along with other development is a necessary evil.

Most regions (including Papua) do not receive a fair and equitable share of the country's wealth leading to a very volatile environment, mining companies are easy but boring targets but they don’t make the regulations

Without the creation of wealth, the environment will always be under threat (hard to care about the survival of the blue bird of happiness when you are starving).

It is the Governments role to regulate companies not companies role to pick up after Governments.

5 comments:

treespotter said...

i wouldn't comment too much otherwise i'd sound like i disagree with everything you said (not true, i LIKE the trolls and the obscene monkey! and other things, too!), but did you read indcoup's post on freeport?

Jakartass said...

"There is a huge outcry at the moment to shut down the “EVIL” Freeport."

There is? From who?

Don't make too many assumptions, Oigal.

The government has given Freeport six months to get its environmental act together, which is generous given the acknowledged and well-documented pollution over 30 years.

There is much talk about the fairer sharing of the wealth ~ check out Yosef Ardi for how much the central government rakes in and note Yosef's conclusion.

A comprehensive audit on all the Central Government income from Papua from all business activities in forestry, fishery, mining, oil, and gas would give us an idea how to improve the region's economy and Papuans prosperity.

I would take issue with your suggestion that Freeport creates wealth. We're talking about gold here, not an energy source but a metal with minimal value if you discount vanity.

Food for the canteens and other essentials for life in the camps was, so presumably still is, imported. You can't let expats suffer, after all.

This mine, like all mines has a limited life. It's probably good that the Papuans have benefited little 'materially' as that means they haven't developed a dependency.

Indeed, as all agree, they haven't developed much at all judged by all poverty yardsticks.

But Jim Bob certainly has.

oigal said...

Treespotter,

Yes, I did just thought I would take a contrary view..is that so bad?

Hi Jakartass,

I will drag the references who is calling for the shutdown over the weekend, its too late now.

It would appear my reference about how much Freeport takes home is wrong as I will back Yosef's figures over others I have. I will correct that in later post.

"The government has given Freeport six months to get its environmental act together, which is generous given the acknowledged and well-documented pollution over 30 years."

Assesed by who? I think that's a great idea if independent. Would it be silly to think there are no other motives? DO you really think it will happen or just leverage for something else?

"A comprehensive audit on all the Central Government income from Papua from all business activities in forestry, fishery, mining, oil, and gas would give us an idea how to improve the region's economy and Papuans prosperity."

100% agree and lets include all other provinces and a external audit at that.

Vanity or not, Gold (and copper by the way)creates wealth income converting to dollars. Dollars Indonesia as a whole badly needs. Dollars properly used (refer Yosef again) buys schools, buys hospitals, buys sewage systems, buys infrasructure.

"This mine, like all mines has a limited life. It's probably good that the Papuans have benefited little 'materially' as that means they haven't developed a dependency."

Not really sure what you mean by this. Surely if the money is used "correctly' then life for all Indonesians should be better both now and after the mine closes with better infrastructure, education etc etc. Or are you suggesting that Papua should be left as it is and always was...is that really practical in the real world and imperfect we live in.

Jim Bob as you call him..well again I agree with you it is a insane amount of money but not directly relevent. A whole post on insane amounts paid to some heads of companies could be done.

I knew full well this would not be popular post (boring if they are). I just smell a HUGE rat with timing and the way it has been ramped up. Further was disappointed that the blogsphere seem to jump straight on the wagon with no questions asked.

oigal said...

Hi Jakartass,

Just read Yosef post again

"Most of it was the contribution of Papua operation. With copper sales of 1.456 billion pounds at average price of US$1.85 per pound, Papua gave US$2.69 billion. Gold sales of 2.79 million ounces at US$456 per ounce from Papua gave US$1.27 billion. Plus silver sales of US$30 million. Altogether, Papua contributed to US$3.99 billion."

Again its a bit selective as there is no mention of costs thats just a revenue run. I wonder what the costs are to run that operation.

I do not dispute Yosef's figures but in this case, there seem to be some missing.

Under the circumstances, I will leave my figures up as the actual take home profit until someone points me to a corrected figures that accounts for all transactions not just the ones that bolster one side of the story only

oigal said...

"There is a huge outcry at the moment to shut down the “EVIL” Freeport."

There is? From who?

Well besides the various protests in Jakarta, Papua and elsewhere. According to "Tempo" this week and last and another report here
Amien Rais hardly a light weight? There are others but how many makes a "huge".

At this time the figures still stand as I have not seen a required correction, awaiting advice.